Under current law, Medicaid will impose a penalty for transfers (donations, gifts, etc.) made within the prior five years of applying for Medicaid long-term care. One method of protecting assets from Medicaid spend-down (e.g. nursing home spend-down) is to transfer assets prior to five years of applying for Medicaid. Assets such as real estate, bank accounts, investments, etc. may be transferred to children and/or grandchildren. Direct transfers may be a problem if your child or grandchild is named in a lawsuit, makes poor decisions with money, or gets a divorce. You also lose all control of the asset with a direct transfer to your children or grandchildren.
A solution to these problems is to transfer the assets to a special type of trust for the benefit of your children and/or grandchildren. These trusts are sometimes referred to as Medicaid Asset Protection Trusts. A Medicaid Asset Protection Trust is designed to protect the assets from creditors and community property settlements from divorces. The trust can also help prevent mismanagement of the assets and squandering on needless expenses. For example, the trust can be used to make distributions for necessary expenses for education, medical needs and emergencies. With the proper trust provisions, the assets may be kept in safekeeping to serve as a safety net if a future need arises. Another benefit of a Medicaid Asset Protection Trust is control. You may have real estate that you wish to transfer to your children and/or grandchildren; however, you don’t want them to sell the real estate. You may prefer to keep the real estate in the family to pass down to future generations. These goals can be accomplished by placing the real estate in a Medicaid Asset Protection Trust. If transferred prior to five years of applying for Medicaid, the real estate is protected from nursing home expenses.
A Medicaid Asset Protection Trust is specifically designed for use in Medicaid planning; therefore, not all trusts will accomplish these goals. You control the provisions for distributions and how the trust is to be used. If you wish, the trust income can be taxed to you as a grantor trust. An additional benefit is the assets in a Medicaid Asset Protection Trust avoid probate.
If you wish to protect assets from Medicaid spend-down, consider transferring assets to Medicaid Asset Protection Trust instead of direct transfers. Making the transfer well in advance of a long-term care need can help to avoid the asset transfer penalty.
If you have questions about Medicaid Asset Protection Trusts or qualifying for Medicaid Long-Term Care benefits in Louisiana, contact Houma elder law attorney, John Sirois at 985-580-2520 or email him. John works with clients in the New Orleans area, the river parishes and throughout South Louisiana.
You can also find more information about Louisiana Medicaid in John’s book, Louisiana Retirement and Estate Planning, 2017 Edition available by contacting John or through Amazon.com. Additional information is available by visiting the Medicaid and Long-Term Care section of John’s website.
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